When she was 19 years old, Sumaiya Bhula made a simple financial decision that would change her life: She opened a Tax-Free Savings Account (TFSA).
After several years of contributing to her TFSA, and investing wisely, she was able to use the funds in her account to help her buy her first home at 28 years old.
“I had a goal to buy a house,” said Bhula, a Senior Manager & Product Group Owner on the Servicing: Saving and Investing Journey team at TD.
“And when I spoke to my personal banker, they said I could start saving in a TFSA, set-up direct deposits into my account, and then invest in mutual funds, stocks, exchange-traded funds (ETFs) or bonds.”
At the time she opened her TFSA, Bhula wasn’t making much money since she was a university student and was only working part-time. But as she started saving, she started to realize that no amount was too small, whether it was $10, $20, $50 – and that her savings started to add up.
“You start getting into that habit of making regular contributions and investing those contributions,” she said.
“I always tell my story because you don't know what you don't know when you're young. A lot of people don't really understand the value of the TFSA.”
Not taking advantage of a TFSA
Unfortunately, that was also the finding of a recent TD survey. While the majority of Canadians polled have opened a TFSA account (65%), a significant number (39%) are not investing the money they’ve deposited into their accounts. This figure rises to 41% among the Gen Z and Millennials surveyed.
Instead of investing their contributions and taking advantage of the tax-free nature of their accounts, many younger Canadians polled are letting their money languish in their TFSA.
There are several reasons Millennial and Gen Z Canadians are not investing within their TFSA, but for many it boils down to thinking they aren’t financially savvy, the survey found.
According to the survey, 19% of respondents said they are not confident in their investment knowledge, and another 22% said they don’t know which investments to choose. About two in 10 (22%) said they simply don’t think they have enough funds in their account to invest.
“A lot of Canadians understand the value of saving, but fewer people recognize the importance of investing the savings within their TFSA,” Bhula said. “Simply parking your cash in your TFSA really limits your potential.”
The benefits of a TFSA
One of the many advantages of a TFSA is its flexibility. It’s a great vehicle for short- and long-term financial goals, from funding a vacation, to buying a car or a house. You can withdraw funds from your TFSA at any time for any purpose, and you don’t have to pay tax on the money you withdraw from your account. In other words, it grows tax-free.
Starting in 2009, every Canadian resident 18 years of age or older could open and contribute to a TFSA. The maximum annual contribution amounts, however, can change every year.
The contribution room in 2026 is $7,000 (plus any contribution room you may be entitled to from previous years). So, if you were eligible to contribute starting from 2009, and have never deposited any money into your TFSA, you could contribute a total of $109,000 into your account starting in 2026.
Another great feature of a TFSA is that you can recontribute funds you withdraw from your account the following year.
That said, it’s always best to check to see what your TFSA contribution limit is with the Canada Revenue Agency if you’re unsure of how much room you have in your plan, so you’re not penalized for over-contributing. If you over-contribute to your TFSA, you’ll be charged a penalty of 1% per month on the over-contribution amount.
“You have the freedom to invest in your TFSA, grow it, and take out your money as you please. TFSAs can benefit everyone, but especially young Canadians who want to save for the future,” Bhula said.
Starting to invest
The challenge for many young people is not knowing where to begin when it comes to investing. The survey found that low financial literacy can result in inaction.
“Among Gen Zs who do not have a TFSA, 74% of those surveyed cite lack of knowledge as a barrier,” Bhula said. “Among that group, 35% said they are not sure where to begin, and 25% said they have limited understanding of the benefits of a TFSA. What’s more, 16% of that group said they find investing too complicated.”
That’s why it’s so important to speak with a knowledgeable professional who can help guide your investment decisions and help you plan for the future. Bhula said it's really important that you look at what you want to accomplish with your money and start educating yourself.
“Speaking to a TD Personal Banker can be really beneficial,” she said. “When you talk to somebody, and they provide you with useful information, it's so much easier to make decisions.”